 Investment in the Euro Area: Why Has It Been Weak?Bergljot Barkbu, Pelin Berkmen, Pavel Lukyantsau, Sergejs Saksonovs and Hanni Schoelermann No 2015/032, IMF Working Papers from International Monetary Fund Abstract: Investment across the euro area remains below its pre-crisis level. Its performance has been weaker than in most previous recessions and financial crises. This paper shows that a part of this weakness can be explained by output dynamics, particularly before the European sovereign debt crisis. The rest is explained by a high cost of capital, financial constraints, corporate leverage, and uncertainty. There is a considerable cross country heterogeneity in terms of both investment dymanics and its determinants. Based on the findings of this paper, investment is expected to pick up as the recovery strengthens and uncertainty declines, but persistent financial fragmentation and high corporate leverage in some countries will likely continue to weigh on investment. Keywords: WP; investment; cash flow; investment dynamics; cost of capital; credit rationing; aggregate investment equation; area investment; investment model; investment performance; investment pattern; performance in Europe; equipment investment; investment equation; Stocks; Neoclassical theory; Currencies; Yield curve; Europe (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2015/032 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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